A day after hiking the retail price of di-ammonia phosphate (DAP) by a steep 58 per cent, fertiliser major IFFCO on Thursday said the increased rate will not be applicable for farmers. It also said that around 1.13 million tonnes (MT) of complex fertilisers, including DAP, will be sold at the old rates in April.
The clarification came after a letter issued by the company showed that the rate of a 50-kilogram bag of DAP was raised to Rs 1,900 from the prevailing rate of Rs 1,200 per bag, an increase of about 58 per cent. The hike was set to come into force from April. Rates of other complex fertilisers were also raised. The hike created a furore on social media and elsewhere with protesting farmers seeing it as another move that will increase the cost of production, coming close on the heels of the sharp rise in diesel rates over the past six months.
Farmers groups said the major impact of the increase would be felt in the coming kharif season, particularly in oilseeds, pulses, and paddy.
“In case of soybean, the cost of production will straight away go up by over Rs 1400 per hectare. As two-three bags of DAP is applied on a hectare of soybean. Similarly, for other crops too, the input cost will rise,” said Abhishek Raghuvanshi, a farmer-activist from Madhya Pradesh.
As a result of the strong push back from farmers, several of whom have been protesting since the last few months, the cooperative major provided a temporary reprieve.
In an official statement issued Thursday, IFFCO said as a manufacturing organisation it had to print the cost on bags for dispatching the new processed materials.
It said the price hike is the tentative cost only for mentioning on the fertiliser bags, which is mandatory. IFFCO said it is negotiating with international raw material suppliers, but talks are still inconclusive.
However, experts said, it remains to be seen for how long IFFCO or any other fertiliser company can refrain from hiking retail rates as international prices of phosphoric acid and ammonia (the two main raw materials required to manufacture DAP) have risen sharply. In fact, the prices of imported DAP have gone up by over 17 per cent in less than two months from $440 per tonne (CFR) to $515 per tonne. The landed price of imported DAP was around $383 per tonne in January, which implies a 35 per cent increase in prices in just over three months.
Phosphoric acid and ammonia
Data shows that international prices of phosphoric acid has risen by 17 per cent between the third and fourth quarters of 2020-21 from $680 per tonne to $795 per tonne.
Similarly, the international spot prices of ammonia, imported mainly from West Asia, also rose from $280 per tonne in February to $430 per tonne in April, an increase of 53.57 per cent. Moreover, negotiating raw material prices is tricky as there are a limited number of global suppliers of phosphoric acid.
Experts said one way to reduce the burden of the hike is for the Centre to increase its share of subsidy for nutrient-based fertilisers, which is due for annual revision this month.
In April 2020, the union government fixed the rates of nutrient-based subsidy rates for phosphatic and potassic fertilisers for the year 2020-21 at Rs 18.78 per kg for nitrogen, Rs 14.88 per kg for phosphorus, Rs 10.11 per kg for Potash, and Rs 2.37 per kg for sulphur.